One way to have a lot of customers is to keep the ones you get. And the ones you keep will generally bring you a much bigger profit margin. In the 1990s, Bain & Company famously said that increasing customer retention by a measly 5% can increase profit by 25% to 95%.

In the guide that follows, we’re going to talk about 10 customer retention strategies for small businesses. The strategies are going to fall into 4 categories: customer experience, customer feedback, outbound marketing, and loyalty and rewards.

Key Takeaways

• Customer retention is almost always cheaper (and thus more profitable) than customer acquisition.
• Just about every business, small or large, retains some of its customers. It’s just that many businesses (especially small ones) can’t see how many customers they’re retaining, which makes it impossible to repeat or scale what’s working.
• If you want to measure your business’s customer retention, you only need five particular metrics to get started.
• Customer retention is a new set of habits, not a set-it-and-forget-it.

Why Customer Retention Matters More Than Ever

It’s not that most small businesses don’t retain customers. It’s that they can’t see how many they’re retaining.

And this is an important thing to see because, if we believe Bain & Company, acquiring a new customer typically costs between 5x and 25x more than keeping one you already have. Retention isn’t safe and boring; it’s the fastest, cheapest growth lever a business has.

Let’s say each sale your business makes is worth an average of $220 in revenue. A customer who buys once is worth $220—that is, they have a customer lifetime value (LTV) of $220. But a customer who keeps buying, say, once a year for 2.5 years, has a CLV of $550. So you’re getting 2.5x more return on your investment (ROI) for that customer than on one who only bought once. That extra $330 isn’t free money, but it’s money that’s a whole lot cheaper than the first $220 was.

10 Proven Customer Retention Strategies for Small Business

Now that we’ve established why retention is so important, here are those 10 customer retention strategies. You don’t necessarily need to run all 10. Pick the one that fits the best and is easiest to implement. Then pick another.

1. Deliver an Exceptional Customer Experience

People telling their friends is still the best form of marketing. Not only does it drive new customer acquisition, but if people are telling their friends, they’re probably also coming back and purchasing again. And why do people remark on a business to their friends? Because their customer experience was remarkable.

When we’re optimizing a customer experience, we’re looking for (marketing jargon alert!) points of friction. Can you ship to PO boxes with no trouble? Is there a way for a customer to fix a mistake on their own order without having to call you? Does your return policy match what a reasonable person would expect or does it hide behind fine print?

2. Build a Customer Loyalty Program

A broad rule of thumb for customer loyalty programs: points-based programs work best for frequent, small(er) purchases, since the reward is always close enough to reach. For example, the points you earn by shopping at a certain grocery store. But tiered programs that assign status to higher-spending customers tend to work better for bigger, less frequent purchases like a mattress. Accumulating points toward your next mattress purchase doesn’t mean much since you’ll probably buy a mattress once a decade or less. In these cases, people respond to recognition and access, like early looks at new accessories or upgrades, and standing (as opposed to cumulative) discounts based on tier.

And providing a modest discount to reward referrals is a two-for-one: you’re deepening the loyalty of the customer making the referral while picking up a new customer for a fraction of what you’d normally spend to find them.

3. Personalize Customer Communication

Personalization doesn’t just mean automating your emails to start with recipients’ first names. It means communicating with individual people in a way that doesn’t feel automated, even if it is. For example, personalized product recommendations that feel helpful and not sales-y.

Someone who bought dog food a month-and-a-half ago probably needs more soon, and you can estimate how soon based on their dog’s breed and the size of the bag they got. Help them not run out by giving them a nudge around the time they should be running low. Or if their dog is a breed that tends to eat kibble too fast, like a beagle, a slow-feeder bowl would be a perfectly personalized recommendation.

Pro tip: When you correspond with a customer by email, sign the email with your real first name. Even use the word “I” instead of “we.” In every way possible, show them you’re a good person like them and not a corporate money-sucking machine.

4. Follow Up After Every Purchase

There are two reasons to follow up with every customer after their purchase: 1) getting high-value marketing assets; 2) building a relationship with that customer.

To get those marketing assets, you can send satisfaction surveys, review requests, referral prompts, etc. Referrals are the most valuable because the sales that come from them are almost free. Their margin is almost 100%.

Building relationships with customers is a bigger risk with a bigger reward. Failing at relationship building in business is, like in life, directly damaging to your bottom line. But succeeding at it is—again, in business and in life—worth enormous amounts of money.

So to keep from messing up your relationships with customers, here’s your goal when you send a post-purchase follow-up: make them even happier with their purchase. The idea is that the gladder a person is that they bought from you, the more eager they are to do it again.

To make them even happier with their purchase than they already are, you’re not asking them to be generous to you; you’re being generous to them. Along with your order confirmation email, send them a setup guide or even the whole user manual. A first-use tip, a way to contact customer service, a personalized, “Let me know if you need anything,” signed with your real first name. Whatever you can think of that you would love to get if you were the customer.

Pro tip: The reaction you’re shooting for is a private, unverifiable thought: “Wow, I hope I never have to get this from anyone else again.”

5. Deliver Outstanding Customer Support

Customer service doesn’t mean the counter by the bathrooms at Walmart. And customer support doesn’t mean an angry agent at a call center. Frankly, it almost means, “Retaining customers one at a time.”

If someone calls, emails, or otherwise contacts you about a problem with their purchase, that’s your chance to show them what they’ll get if they choose to deepen their relationship with your company. Fast response times, self-service resources that don’t feel like homework assignments, and proactive communication are what you’d hope for as a customer, so they’re what you deliver if outstanding customer support is one of your customer-retention strategies.

And to be clear, AI chatbots are a self-service resource that can deliver genuinely good help, fast. Often, they even do it in a more customer-friendly way than a human employee would. A simple “How do I turn it on?” is a perfect query for AI because (assuming proper training) you know the answer will be correct, fast, concise, and polite. Delegating these types of “first-tier” queries to machines frees you up to deliver that same quality of support on more complicated requests.

Finally, proactive communication is a godsend for customer support. If there’s a shipping delay, a recall, or any other hiccup—especially if the customer hasn’t contacted you about it yet—an unscheduled email earns not only trust but also personal respect and earnest gratitude. Your message can be little more than, “Just wanted to let you know; will keep you posted.” A quick, no-pressure outreach like that makes a customer feel valued in a way that disingenuously referring to them as a “valued customer” can’t.

6. Use Email Marketing to Stay Top of Mind

But what if your product is really as good as you say it is? What if there’s no need for the kind of proactive communication we talked about above? This is what email marketing is for.

When you’re looking for what to say in a marketing email, come back to the goal of making your customers even happier with their purchase. With a drip campaign, you might send a quarterly discount on upgrades or accessories. Or you could have a weekly or monthly newsletter where you update customers on usage tips, share a customer’s creative use of the product, highlight new products, or answer a question you’ve been getting lately.

Whatever keeps you in a customer’s inbox without asking them for anything. The point isn’t to make more sales right away; it’s to keep customers close, to make them glad to hear from you. So when the time comes, they come back to you voluntarily.

7. Collect Customer Feedback and Act on It

Some of the strategies we’ve gone over can lead to obtaining customer feedback, especially the third, fourth, and fifth strategies. But another whole strategy is to make customer feedback your goal and experiment until you find the best way(s) to get it.

Google and Yelp reviews are good for this. Asking an occasional customer if you can schedule an interview with them is too, especially during or after an experience with your customer service.

One classic way to get feedback is to include a certain question in the order confirmation: “On a scale of 1-10, how likely are you to recommend us to a friend or colleague?” The average score (put through a few simple statistical adjustments) is called the Net Promoter Score (NPS).

However you get your customer feedback (and there are plenty more ways we don’t have time to talk about right now), the point is to act on it, and to tell your customers that you did. We hope making the improvement will help customer retention in the future; letting people know we made it is how we help our customer retention in the present.

8. Reward Repeat Customers

This one is a little different. You could almost use this strategy alongside any of the others. It’s a one-time reward for a certain tier of customer whose repeat purchases are especially important to you. It’s purely to strengthen your relationship with them. These are people who have already proven that investing in them will, on the whole, pay for itself.

Send them a surprise gift that’s more thoughtful or interesting than a discount. You only have to do it once for it to never be forgotten. In business, as in life, the best gift is a thoughtful one; it makes the recipient feel loved. And it doesn’t guarantee the relationship will never end, but it helps it continue a while longer.

9. Build a Strong Brand Community

A loyalty program (strategy #2) keeps someone coming back to you. A community keeps them coming back to each other, with your business being the reason they’re all there.

It can be a Facebook group where customers swap tips on how to use your products, a special event that gets people in the same physical or virtual room, or even just consistently featuring user-generated content (UGC) so people can see themselves as part of your brand instead of just being marketed to by it.

The tricky part is designing the group so it’s really worth showing up to. Building a strong brand community is the most complicated and involved customer retention strategy on this list, but it has monster potential. Like we said earlier, word of mouth is the best kind of marketing. When you build a community for customers to find each other and talk about you, you’re helping make word of mouth happen.

10. Measure and Improve Retention Continuously

Whatever customer retention strategies you try, you’ll never know if they work unless you track your results. So no matter what other strategies you pick, no matter what kind of business you have, you’ve just got to pair them with strategy #10.

In fact, the way to lay the strongest foundation for your customer retention project is to start measuring and improving some key metrics—ones that every small business should track anyway—before you get going. This way, you’ll get benchmarks to improve on, as well as visibility into those numbers, so you can see when they’ve improved.

But there’s no finish line in customer retention. It’s a project with no end. One reason to try many different strategies is that each one will have times when it doesn’t work as well. If your post-purchase follow-ups aren’t getting many responses this quarter, maybe your brand community will carry the team for a while. You get the idea.

We’re going to spend the next section looking into a few of the most important metrics that few small businesses track very well, and that can give you a major edge.

Key Metrics Every Small Business Should Track

Let’s say you own an ecommerce store that sells aftermarket diesel parts. The quarter just ended and we’re reviewing your numbers for that period.

• Purchases
  • Total Purchases (TP): Your company processed 550 purchases (TP), from 500 total customers (TC), this past quarter
  • Repeat Purchases (RP): 350 of those 550 orders came from people who had bought from you at least once before in the previous, say, 12 months
• Customers
  • Total Customers Start (TC start): When the quarter started, 340 people had bought from you at least once in the last 12 months
  • Total Customers End (TC end): By the end of the quarter, 500 people had bought from you at least once in the last 12 months
  • Repeat Customers (RC): 300 of last quarter’s customers had bought from you at least once in the last 12 months
  • New Customers (NC): 200 of them hadn’t
  • Referral Customers (RFC): 60 people told you (or you could tell) that they found you through another customer
  • Lost Customers (LC): 40 people hit the 12-month mark since their last purchase
• Averages
  • Average Order Value (AOV): On average, each order was worth $220 in revenue
  • Average Customer Lifespan (ACL): The average customer keeps buying from you at least once every 12 months, for about 2.5 years before they stop

Now, to see how your business is doing, we’ll plug those numbers into the formula for each key metric that every small business should track:

Common Customer Retention Mistakes to Avoid

Now, anyone who’s been in business for more than about 24 hours knows that mistakes are as reliable as death and taxes. So when you first start really working on your customer retention, you’re going to make some. In fact, you’re going to make some that you’ll cringe and laugh at in a year. Good—make them, learn from them, and keep going.

But as a little bonus, here are five mistakes that are easy to make. If this section saves you an hour or a dollar by warning you about them early, it has done its job. If you still fall face-first into each one, no problem; refer to the last sentence of the previous paragraph.

Inconsistent Customer Experiences

A customer who has a great experience the first time and a mediocre one the second time doesn’t average the two together and call it fine. They just learn they can’t count on you. And a business they can’t count on is one they’ll happily replace the moment a more reliable option shows up. Consistency is hard to pull off because it means giving someone the same awesome experience on your worst, busiest day as you do on your best one. But that’s how to earn the kind of trust that keeps people coming back.

Focusing Too Much on Customer Acquisition

Chasing new customers feels like growth, and it’s supposed to. But sometimes it’s only replacement. If you bring in 200 new customers this quarter but lose 180 old ones, you didn’t grow by 200. You grew by 20, and you paid full acquisition price for all 200 new customers. That’s the trap of focusing only on the top of the funnel: you can pour more and more in and barely move, because the customers you already earned are leaking out the bottom.

Excessive Promotional Emails

There’s a point where “staying top of mind” turns into “getting on people’s nerves,” and sometimes it’s pretty early in the process. If every email you send asks for another sale, people stop reading. Worse, they start associating your name with the little flash of annoyance they feel when they delete you. The customers who used to be glad to hear from you unsubscribe.

If you remember strategy #6, you already know the fix: earn the inbox by being worth reading, and sell sparingly enough that it still feels like news when you do.

Bad Customer Service

When someone comes to you with a problem and leaves feeling like they were a nuisance for asking (or like you were the nuisance for not helping), that’s the kind of experience that makes them want to leave you behind and find what they need somewhere else. Remember, support is your single best chance to show a customer what a deeper relationship with you will feel like. Bad support shows them that when they need you most, you’ll let them down.

Not Acting on Customer Feedback

Collecting feedback and then doing nothing with it is worse than never asking. When you ask customers what they think and then change nothing, you’ve taught them that their opinion doesn’t matter. Feedback is only worth gathering if you act on it and tell people you did.

Digital Marketing’s Role in Customer Retention

It sure doesn’t always seem like it, but technology really does make things easier. That’s why we offer digital marketing services instead of analog ones. And because we love you, here’s another bonus: three things from marketing tech that make customer retention easier.

Marketing Automation

No mere mortal can follow up with every customer, especially if that mortal gets an hour or more of sleep most nights. But robots can.

In fact, you don’t even need robots for this. Just a well-built, automatic email sequence. You (or someone at the marketing agency you work with) can cue up an automatic send of your setup guide the day before an order arrives, the check-in a week later, and the “you’re probably running low” nudge right when the math says they probably are.

Important: The point here isn’t to replace the personal, human touch with a machine. It’s to give that personal touch to everybody who buys from you. If you only needed one customer, you could spend all your time on them; but since you need many more than one, marketing automation allows you to make copies of yourself and be there for everybody when they need you.

Content Marketing

Like a brand community, content marketing has to be good enough to stand on its own. You’re on the right track if someone might think your content was made for its own sake and not even to promote anything. That’s because a blog, video, or newsletter that exists only to make more sales gets ignored, like any other ad.

But real content that’s genuinely educational or entertaining or both gets all the attention an entrepreneur could want for their ads. If, say, your how-to guide is the best explanation on the internet, customers will come back to it, share it with each other, and think of you when they’re ready to go deeper.

Customer Relationship Management & Customer Data

Practically everything in this article depends on knowing who your customers are and what they’ve done about you. That’s what a customer relationship management (CRM) system is for. This is where you track the key metrics we talked about two sections ago, with the table that had all those formulas.

If you don’t use a CRM, you’re stuck with your own memory, which, like we talked about in “Marketing Automation” above, just isn’t going to be good enough if you’re subject to the human condition.

But setting one up is a big project, even for people who do it a lot. So (spoiler alert!) this is one thing to have an agency do for you.

Retention Strategies by Business Type

Not every strategy fits every business. Here’s a rough map of where to start, depending on what kind of business you run.

None of these is exclusive to the type of business it’s paired with in the table. An ecommerce store can build a community and a service business can run a loyalty program. This is just where the fastest return tends to be for each type, based on how often customers buy and how much relationship is involved.

Creating a Customer Retention Plan

You don’t need a complicated plan. You need a simple one that you’ll really follow. Pick one customer retention strategy, optimize it, and then pick another one to try when you’re not maintaining the first one.

To pick your first one, pull as many of the metrics from earlier as you can—retention rate, repeat purchase rate, churn, etc.—and write down today’s numbers. Those can be your benchmarks for now.

Then find your weakest point in the numbers you were able to get. If your churn rate is high, the problem is probably experience or support. If your repeat purchase rate is low but customers seem happy, the problem might just be that nobody’s reminding them to come back. Let the numbers point you at the strategy; don’t pick a strategy at random.

Whatever you pick, give it at least a full quarter before you judge its success. Retention moves slowly. A strategy that looks like a dud after two weeks might be working just fine by week ten. Set a measurable goal (raise repeat purchase rate from, say, 60% to 65%), and check it at the end of the quarter.

And repeat. Retention isn’t a set-it-and-forget-it thing. It’s a new habit: check the numbers, find the weak point, fix it, and measure again next quarter. Even with limited time and budget, that loop is enough. You don’t need to run all ten strategies. You just need to run the loop.

When to Partner with a Digital Marketing Agency

You can start every strategy in this article on your own. The question is how deep you can get into it, and how you’re going to maintain it on top of running your business.

It’s not necessarily that doing any of these things is too hard for you; it’s just that there are so many things, and you have to be consistent with all the ones you do. An agency’s job is to figure out which of these strategies would help you the most and the most quickly, build those systems quickly, run them well, and show you what effect they’re having on your bottom line. Then, to strategize about what adjustments to make and repeat. Meanwhile, you’re doing the things that you got into business to do.

Conclusion

Growth doesn’t only come from finding new customers; it also comes from keeping the ones you’ve already earned.

None of the ten strategies here is complicated on its own. The advantage comes from small, consistent improvements: a smoother customer experience, a better follow-up, and a reason to come back, stacked up over months until repeat customers become the steady base your business grows from.

So look at where your retention stands right now, pick the one strategy that fits you best, and start. Then pick another. And reach out when it’s time for help.

FAQs

How long does it typically take to see results from a customer retention strategy?

Usually, at least a quarter. Retention moves slower than acquisition because you’re waiting for customers to come back on their own natural buying cycle, which might be weeks or months. A follow-up sequence or loyalty program might show early signs in a few weeks, but give any strategy at least a full quarter before you decide if it’s working.

What is a good customer retention rate for a small business?

It depends heavily on your industry and how often customers naturally buy. A subscription business might see 90% or higher, while an ecommerce store might sit closer to 30%-40% and be just fine. Instead of chasing a universal number, measure your own rate today and work on improving it.

Can customer retention strategies work without a dedicated CRM system?

Yes, early on. If you’ve only got a few dozen customers, a spreadsheet and a little discipline can go a long way. A CRM becomes worth it once you have more customers than you can keep track of anymore, because that’s the point where personalization and timely follow-ups start getting missed. Start simple, and upgrade when that simple version stops working.

How do customer retention strategies differ between B2B and B2C businesses?

The principles are the same, but the scale and pace differ. B2B businesses usually have fewer customers, each worth much more, with longer relationships and more people involved in each decision. That makes personal relationship-building and account management the priority. B2C businesses have more customers at lower individual value, so automation, loyalty programs, and email marketing are often better. In both cases, the goal is the same: make customers glad they chose you, so they choose you again.

What are the first three retention initiatives a small business should implement on a limited budget?

If you’re going to forego tracking your numbers (strategy #10) in the beginning, start with post-purchase follow-up, since it costs almost nothing and directly makes customers happier with what they bought. Add a simple way to collect and act on feedback, so you find out what’s driving people away before it costs you. Then set up basic email marketing to stay in touch between purchases.

If you track numbers, start there and then add post-purchase follow-up, then add a simple way to collect and act on feedback.